Savings Medicare Beneficiaries Need for Health Expenses: Some Couples Could Need as Much as $400,000, Up From $370,000 in 2017

Summary

Since 2011, the amount of savings Medicare beneficiaries are projected to need to cover program premiums, deductibles, and certain other health expenses in retirement has risen as much as 9 percent, according to EBRI’s estimates. Since 2017, the amount has risen 2–13 percent. This includes the savings needed to pay for premiums for Medicare Parts B and D, premiums for Medigap Plan F, and out-of-pocket spending for outpatient prescription drugs.

The data used in EBRI’s analysis come from a variety of sources. EBRI employed a Monte Carlo simulation model for this evaluation that simulated 100,000 observations, allowing for the uncertainty related to individual mortality and rates of return on assets in retirement.

The analysis reveals:

In 2018, a 65-year-old man needs $75,000 in savings and a 65-year-old woman needs $99,000 for a 50 percent chance of having enough to cover premiums and median prescription drug expenses in retirement. For a 90 percent chance of having enough savings, the man needs $148,000 and the woman needs $161,000.

For a 50 percent chance of having enough to cover health care expenses in retirement, a couple with median prescription drug expenses needs $174,000 in savings. For a 90 percent chance of having enough, the couple needs $296,000 in savings.

At the extreme — a couple with drug expenses at the 90th percentile throughout retirement who want a 90 percent chance of having enough money for health care expenses in retirement by age 65 — targeted savings are $399,000 in 2018.

From 2011 to 2018, projected savings targets increased as much as 9 percent for some Medicare beneficiaries — savings targets declined between 2011 and 2014, before increasing from 2014 to 2018. Savings targets are up between 2 percent and 13 percent since 2017.

However, for those with drug expenses at the 90th percentile throughout retirement, savings targets fell 2 percent between 2011 and 2018.